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New chief executive: NEDCO is about more than loans

Julian Henry, chief executive National Entrepreneurship Development Company Ltd (NEDCO)

The National Entrepreneurship Development Company Ltd (NEDCO) is not just about offering small businesses loans, but building the next generation of entrepreneurs to take the country into the future, said the state agency’s newly-installed chief executive Julian Henry.

“We want to put a mantra out there that we are going to help grow entrepreneurs. This is not just about getting a loan. We are developing entrepreneurs. We have 1,500 serious entrepreneurs on our portfolio. There are loans in addition to that on the portfolio that are being handled under a special programme. We want to help entrepreneurs service their loans and better manage their business,” he told the Business Guardian in an interview on July 23.

Thrust into the position in controversial circumstances after the dismissal of former chief executive Ramlochan Ragoonanan in May, Henry says he is more than up to the challenge. Prior to taking over the reins at NEDCO, Henry served as chief operations officer where he overhauled the company’s dated loans approval process, installed a new customer relationship management system that kept track of customers’ loan payments, and embarked on a training programme that improved efficiency, customer service and staff morale.

Thrown in at the deep end, Henry’s first task is trying to regain customer and stakeholder confidence following news reports of improper procedures and conflicts with the construction of a $1.2 million office complex for the National Business Incubator System (IBIS) in Penal.

In May, Labour Minister Errol McLeod announced that Ragoonanan has been fired, even as Cabinet got a report from the NEDCO board on $1.2 million worth of offices in Penal for NEDCO and the IBIS programme.

Boasting a wealth of knowledge in the small business development and the financial services sector across the Caribbean, Henry held senior positions at the National Development Foundation in Antigua and Barbuda and at Caribbean Micro-Finance Company Ltd. At the latter, he developed systems and models to deliver financing and other technical resources to small-scale entrepreneurs and micro enterprises that were unable to access funding and resources from traditional lenders.

More than loans

Henry said NEDCO will be requesting $15 million from Government for the period June to the end of the fiscal year in September to put the Government’s small business and entrepreneurial development programme back on track.

“This would be our operations budget from June to September, which will take us to the end of the fiscal year. That would allow us to do significant loan disbursement as well as entrepreneurial support services,” he said.

The agency has a wide reach across the country with ten branches, including one in Tobago.

He said one of his main objectives is to upgrade NEDCO in the areas of lending, customer relations and operational efficiency.

“This would meet the mandate of the company and take it forward. I want to take NEDCO to a level where it is providing the best customer service where it is operating at a level where it economically and also operationally viable. We must look at NEDCO's revenue streams and operating expenses to find a way to improve efficiencies and operations at a more sustainable level,” he said.

Henry said the target market for NEDCO are entrepreneurs who are small, micro and even medium scale business operators who are interested in accessing funding to grow their businesses.

“These would be people who are in need of financial services and other development services, like mentorship, training, advice and linkages to other programmes. We evaluate clients on their business ideas, business goals and an assessment of their financial capabilities, so we can help the client to determine how to take their business to the next level,” he said.

In 2005, NEDCO set up the Entrepreneurial Training Institute and Incubation Centre (ETIIC), which provides training and mentorship services to entrepreneurs.

He said over the past two years, NEDCO has been working closely with ETIIC to assess the business capability of entrepreneurs requesting support and funding from NEDCO.

“We have linked that to a new methodology of client assessment for those who walk into the organisation and are interested in a loan. In the past, the loan officer would ask if they have collateral. If the client replies by saying no, that would be the end of it,” he said.

Henry said today the company has moved to the stage where the staff has been trained to “holistically analyse” the entrepreneur and determine all of the entrepreneurial capabilities as well as gaps where NEDCO can provide support and boost their success.

“We can better assess the area of competence the entrepreneur is bringing to the table when they come for entrepreneurial development support. We look at management, social networking, we look at family support, we look at financial literacy, we look organisational infrastructure, we look at their marketing strengths and weaknesses,” he said.

He said the conventional way to look at entrepreneurs is to look at their business plan and do assessment on their cash flow capability, which will impact positively on the success rates NEDCO will be experiencing in the future.

“Right now the success rate for those coming to NEDCO will be 100 per cent on the basis of the type of service we offer. Not everyone will get a loan, but everyone will get development support. So long as you are interested in developing your business and you are hard working, you are guaranteed service from NEDCO,” he said.

He said what it takes to develop a business is not always a “$50,000 loan.”

NEDCO provides loans up to $500,000.

“To get there, we need viable, functioning, sustainable businesses that the owners will be able to manage in the long term. In order to achieve that level of operation, you must combine financial support, training support, and even mentorship and guidance. If they meet all the requirements immediately to get the loan request, then certainly, they will get it right away. We may even ask them to mentor our young entrepreneurs,” he said.

“We attract about 400-500 walk-ins per month. I think that could be better. We have ten branches and I would like it to be about 100 per branch a month. If we are doing our business right and offering the right service, then the word would spread that NEDCO is doing the right things for entrepreneurs,” he said.

He said the statistics show that most start-ups fail within five years.

“Ninety per cent of start up business operations will fail before three to four years. That is the statistics worldwide. Why do they fail? They fail very often because a business starts up operations, purchases equipment, does some marketing, and launches right into business without setting up the proper business acumen, without full appreciation for all the other organisational requirements.

“Very often start up entrepreneurs are very skilled technically, have experience and they launch into a business without having an appreciation of the range of requirements that is required to run a business,” he said.

He added that NEDCO is working with staff to ensure they “hold the hands” of entrepreneurs and will work with them to grow their business even further.

“We have to ensure that the quality of our portfolio grows to a higher standard, you can achieve this by holding our clients hand and not just giving a loan and waiting to see what happens. Not by doing a loan for a client and only calling when it is time to pay and only showing interest when they go into arrears. There is no way to achieve good portfolio quality like that,” he said.

Enabling SMEs to succeed

Henry said the role of SMEs in the national economy is “absolutely important.”

“The economy is made up of big corporations like Petrotrin, ANSA McAL or Massy. These are essential to the economy. They provide the opportunities for small, medium and micro entrepreneurs. Small businesses, like groceries or auto dealers, provide opportunities for the medium businesses. The economy functions best with the Government providing the enabling environment for the large companies to be viable, but also programmes for the small and micro entrepreneurial development. The two sides of the spectrum support each other,” he said.

Henry said the needs of SMEs are different from larger incorporated businesses.

“Their ability to meet the requirements of commercial banks, they may not be able to meet them in all cases. We recognise that, so NEDCO is that institution that has structured its operations to treat with those entrepreneurs and fill the gap between a micro entrepreneur and a large business,” he said.

Regular and accurate accounts

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He said while NECDO is required to release audited statements, none has been released since 2010.

“There is a lot of work the organisation needs to do to get to the point where we produce audited accounts regularly and accurately. The last report released was in 2010. I am crystal clear in my objective that we must produce audited financial statements on an annual basis. We need to have a properly functioning auditing department,” he said.

He said they are in the process of “clearing up the backlog” now.

“Before the end of the fiscal year in September, we want to be able to have 2011 and 2012 dealt with. As soon as that is done, we want to complete 2013 audited statements,” he said.

He admits that NEDCO ran into problems in the past.

“The organisation ran into problems with timely and accurate reporting in a number of areas that may not have been the best in terms of achieving operational efficiency. We must now look to see if the organisation has the manpower and database management packages in order to deliver. In the past, there were staff turnovers and things were left incomplete,” Henry said.